EXAM 2 - Accounting

Jones Company developed the following static budget at the beginning of the company's accounting period: Revenue (8,000 units)$16,000 Variable costs 4,000 Contribution margin$12,000 Fixed costs 4,000 Net income$8,000 If actual production totals 8,200 units, the flexible budget would show total costs of:

$8,100.

Which of the following is generally included in a sales budget?

Schedule of cash receipts for the projected sales

A company's numerous specific budgets (sales, inventory purchases, etc.) together are referred to as the:

master budget.

Skymont Company wants an ending inventory each month equal to 30% of that month's cost of goods sold. Cost of goods sold for February is projected at $88,000. Ending inventory at the end of January was $31,000. Based on this information, purchases for February would be:

$83,400.

The Bach Company provides the following standard and actual costs relating to material price and labor usage. Item to ClassifyStandardActualMaterial Price 8.50per gallon 8.35per gallonLabor Usage 30,000hours 28,500per hour Based on the above information, which statement is correct?

Both the materials price variance and the labor usage variance are favorable.

Select the response that indicates the correct sequence of product cost flows from production to sale.

Raw materials, work in process, finished goods, and cost of goods sold

Which of the following statements regarding the schedule of cost of goods manufactured and sold is correct?

The schedule is an internal document that is not presented with the company's financial statements, and, in addition, the schedule of cost of goods manufactured and sold reports the amount of direct raw materials used during the period.

A difference between the static budget based on planned volume and a flexible budget prepared at actual volume is called a:

Volume variance

Pinkston Company completed 12,000 units of product at a total cost of $28,000. The recording of the product completed would include a decrease to:

Work in Process Inventory.

The sales volume variance is the difference between the:

static budget (based on planned volume) and the flexible budget (based on actual volume)

Planning concerned with long-range decisions such as defining the scope of the business is referred to as:

strategic planning.

Bates Company recognized $16,000 of estimated manufacturing overhead costs at the end of the month. As a result of this transaction the:

temporary account manufacturing overhead decreases and the work in process account increases.

The Winchester Company estimates that its overhead costs will amount to $595,000 and the company's manufacturing employees will work 85,000 direct labor hours during the current year. If actual overhead costs for the year amounted to $599,000 and actual labor hours amounted to 87,000, then overhead would be:

overapplied by $10,000.

Benton Company's sales budget shows the following expected total sales: Month Sales January$22,000 February$26,000 March$31,000 April$44,000 The company expects 80% of its sales to be on account (credit sales). Credit sales are collected as follows: 25% in the month of sale and 70% in the month following the sale, with the remainder being uncollectible and written off. The total cash receipts during April would be:

$34,960.

Chu Company provided the following information related to its inventory sales and purchases for December Year 1 and the first quarter of Year 2: Dec. Year 1 Jan. Year 2 Feb. Year 2 Mar. Year 2 (Actual) (Budgeted) (Budgeted) (Budgeted)Cost of goods sold$46,000 $76,000 $96,000 $66,000 Desired ending inventory levels are 25% of the following month's projected cost of goods sold. Budgeted purchases of inventory in February Year 2 would be:

$88,500.

Chu Company provided the following information related to its inventory sales and purchases for December Year 1 and the first quarter of Year 2: Dec. Year 1 Jan. Year 2 Feb. Year 2 Mar. Year 2 (Actual) (Budgeted) (Budgeted) (Budgeted)Cost of goods sold$49,000 $79,000 $99,000 $69,000 Desired ending inventory levels are 25% of the following month's projected cost of goods sold. Budgeted purchases of inventory in February Year 2 would be:

$91,500.

Which of the following accounts would appear on the inventory purchases budget and pro forma balance sheet?

Accounts payable

Which of the following items typically found on the selling and administrative expense budget will also impact the cash budget?

Both administrative salaries and advertising expense are correct.

Which of the following is not considered a pro forma financial statement?

Sales budget

The Juarez Corporation incurred the following transactions during its first year of operations. (Assume all transactions involve cash). 1) Acquired $2,800 of capital from the owners. 2) Purchased $480 of direct raw materials. 3) Used $390 of these direct raw materials in the production process. 4) Paid production workers $580 cash. 5) Paid $380 for manufacturing overhead (applied and actual overhead are the same). 6) Started and completed 300 units of inventory. 7) Sold 230 units at a price of $6 each. 8) Paid $220 for selling and administrative expenses. The amount of cost of goods manufactured would be:

$1,350.

The Landrum Company provides the following standard cost data per unit of product: Variable overhead$8.00 Landrum anticipated that they would produce and sell 24,000 units. During the period, the company produced and sold 25,000 units, incurring $210,000 of variable overhead costs.The variable overhead flexible budget variance was:

$10,000 unfavorable.

Compton Company expects the following total sales: Month Sales March$26,000 April$16,000 May$28,000 June$21,000 The company expects 60% of its sales to be credit sales and 40% for cash. Credit sales are collected as follows: 30% in the month of sale, 70% in the month following the sale. The budgeted accounts receivable balance on May 31 is:

$11,760.

The Russell Company provides the following standard cost data per unit of product: Direct material (3 gallons @ $5 per gallon)$15.00 Direct labor (2 hours @ $12 per hour)$24.00 During the period, the company produced and sold 24,000 units, incurring the following costs: Direct material75,000gallons@$4.90per gallonDirect labor48,500hours@$11.75per hour The direct labor price variance was:

$12,125 favorable.

Stafford Company prepared a static budget for a production and sales volume of 10,000 units. Per unit standards Static Budget Number of units 10,000 Sales revenue$65.00 $650,000 Variable manufacturing costs: Materials$11.00 110,000 Labor$9.00 90,000 Overhead$4.20 42,000 Variable general, selling, and administrative costs$11.00 110,000 Contribution margin $298,000 Fixed costs Manufacturing overhead 100,800 General, selling, and administrative costs 45,000 Net income $152,200 What is the net income if 9,000 units are sold?

$122,400

Valley Farm Supply started the period with $80,000 cash. Cash receipts for January were expected to total $350,000. Cash disbursements for January were expected to be $290,000. What is the expected cash balance at the end of January?

$140,000

Burruss Company developed a static budget at the beginning of the company's accounting period based on an expected volume of 8,000 units: Per UnitRevenue$4.00 Variable costs 1.50 Contribution margin$2.50 Fixed costs 2.00 Net income$0.50 If actual production totals 10,000 units, which is within the relevant range, the flexible budget would show fixed costs of:

$16,000.

Frost Corporation incurred the following transactions during its first year of operations. (Assume all transactions involve cash.) 1) Acquired $2,600 of capital from the owners. 2) Purchased $540 of direct raw materials. 3) Used $370 of these direct raw materials in the production process. 4) Paid production workers $560 cash. 5) Paid $360 for manufacturing overhead (applied and actual overhead are the same). 6) Started and completed 300 units of inventory. 7) Sold 210 units at a price of $6 each. 8) Paid $200 for selling and administrative expenses. The amount of raw material inventory on the balance sheet at the end of the accounting period would be:

$170.

Frost Corporation incurred the following transactions during its first year of operations. (Assume all transactions involve cash.) 1) Acquired $3,000 of capital from the owners. 2) Purchased $600 of direct raw materials. 3) Used $410 of these direct raw materials in the production process. 4) Paid production workers $600 cash. 5) Paid $400 for manufacturing overhead (applied and actual overhead are the same). 6) Started and completed 300 units of inventory. 7) Sold 250 units at a price of $6 each. 8) Paid $240 for selling and administrative expenses. The amount of raw material inventory on the balance sheet at the end of the accounting period would be:

$190.

The following budget information is available for Crescent Company for January Year 2: Sales$800,000 Cost of goods sold 540,000 Utilities expense 2,500 Administrative salaries 100,000 Sales commissions 5% of salesAdvertising 20,000 Depreciation on store equipment 50,000 Rent on administration building 60,000 Miscellaneous administrative expenses 10,000 Percentage of sales on credit 80% All operating expenses are paid in cash in the month incurred. The amount of expected cash outflow for selling and administrative expenses would be:

$232,500.

The following budget information is available for the Arch Company for January Year 2: Sales$860,000 Cost of goods sold 540,000 Utilities expense 2,800 Administrative salaries 100,000 Sales commissions 5% of salesAdvertising 20,000 Depreciation on store equipment 50,000 Rent on administration building 60,000 Miscellaneous administrative expenses 10,000 All operating expenses are paid in cash in the month incurred. Compute the total budgeted selling and administrative expenses (excluding interest) amount for January Year 2.

$285,800

White Company budgeted for $287,100 of fixed overhead cost and volume of 43,500 units. During the year, the company produced and sold 42,500 units and spent $295,800 on fixed overhead.The fixed overhead cost spending variance is:

$8,700 unfavorable.

The Ferguson Company estimated that October sales would be 100,000 units with an average selling price of $6.00. Actual sales for October were 105,000 units, and average selling price was $5.95.The sales revenue flexible budget variance was:

$5,250 unfavorable.

The standard amount of materials required to make one unit of Product Q is 4 pounds. Tusa's static budget showed a planned production of 4,900 units. During the period, the company actually produced 5,000 units of product. The actual amount of materials used averaged 3.9 pounds per unit. The standard price of material is $1 per pound. Based on this information, the materials usage variance was:

$500 favorable.

Dobson Company expects to begin operating on January 1. The company's master budget contained the following operating expense budget: January February MarchSalary expense$40,000 $36,000 $36,000 Sales commissions, 5% of sales 24,000 30,000 28,000 Utilities 2,800 2,800 2,800 Depreciation on store equipment 1,800 1,800 1,800 Rent 7,200 7,200 7,200 Miscellaneous 1,800 1,800 1,800 Total operating expenses$77,600 $79,600 $77,600 Sales commissions are paid in cash in the month following the month in which the expense is recognized. All other expense items requiring cash payment are paid in the month in which they are recognized. The amount of cash to be paid for operating expenses during the month of January is:

$51,800.

The following static budget is provided: Units 20,000 UnitsSales$200,000 Less variable costs: Manufacturing costs$70,000 Selling and administrative costs$40,000 Contribution margin$90,000 Less fixed costs: Manufacturing costs$22,000 Selling and administrative costs$17,000 Net Income$51,000 What will budgeted net income equal if 21,000 units are produced and sold?

$55,500

Fortune Company had beginning raw materials inventory of $9,800. During the period, the company purchased $55,000 of raw materials on account. If the ending balance in raw materials was $6,800, the amount of raw materials transferred to work in process is:

$58,000.

White Company budgeted for $236,500 of fixed overhead cost and volume of 43,000 units. During the year, the company produced and sold 42,000 units and spent $245,100 on fixed overhead.The fixed overhead cost spending variance is:

$8,600 unfavorable.

The cost of indirect labor will initially be charged to:

Manufacturing Overhead.

Budgeted depreciation expense would not appear on a:

Cash budget.

Grimes Company sold 2,500 units that had cost $12,000 to produce. The recording of the sale would include an increase to:

Cost of Goods Sold.

Select the correct equation format for the purchases budget.

Cost of budgeted sales + desired ending inventory - beginning inventory = required purchases.

Which of the following items will not appear on a cash budget?

Expected credit sales

Which of the following items is not needed to prepare an inventory purchases budget for a merchandising business?

Expected unit selling price

Item to ClassifyStandardActualSales volume 100,000units 96,000unitsSales price$4per unit$3.90per unitMaterial usage 40,000gallons 42,000gallonsLabor price 12.50per hour 12.45per hour All of the following variances are unfavorable except?

Labor price

Item to ClassifyStandardActualSales volume 100,000units 96,000unitsSales price$4per unit$3.90per unitMaterial usage 40,000gallons 42,000gallonsLabor price 12.50per hour 12.45per hour All of the following variances are unfavorableexcept?

Labor price

Select the incorrect statement concerning the human factor of performance evaluation.

Managers should always be punished for unfavorable variances.

Which of the following is not an inventory account maintained by a manufacturing company?

Merchandise inventory

Which of the following items would be least useful in preparing a schedule of cash receipts?

Number of units expected to be purchased.

Which range of difficulty should normally be used to develop standards?

Practical standards

Standards that do allow for normal downtime and can be achieved with reasonable amounts of effort are known as:

Practical standards.

For a manufacturing business, cost of indirect materials is first recorded in the:

Raw Materials Inventory account.

Purchasing production supplies for cash is a(n):

asset exchange transaction.

Cost of goods sold is equal to the cost of goods

available for sale minus ending finished goods.

Budgeting that involves decisions such as whether to buy or lease equipment or build a new factory is referred to as:

capital budgeting.

Company X manufactures 3-ring notebooks. All of the following are considered indirect costs except:

cardboard used in production of the notebooks.

Budgeted sales commissions would appear on the:

selling, general, and administrative budget and pro forma income statement